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GLOBAL RISK CONTRACTS

GLOBAL RISK CONTRACTS FINDINGS FROM REPORT ON EXAMINATION OF HEALTH CARE COST TRENDS AND COST DRIVERS PURSUANT TO G.L. c. 118G, § 6½(b) JUNE 29, 2011 OFFICE OF ATTORNEY GENERAL MARTHA COAKLEY ONE ASHBURTON PLACE • BOSTON, MA 02108. WHAT ARE GLOBAL PAYMENTS?.

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GLOBAL RISK CONTRACTS

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  1. GLOBAL RISK CONTRACTS FINDINGS FROM REPORT ON EXAMINATION OF HEALTH CARE COST TRENDS AND COST DRIVERS PURSUANT TO G.L. c. 118G, § 6½(b) JUNE 29, 2011 OFFICE OF ATTORNEY GENERAL MARTHA COAKLEY ONE ASHBURTON PLACE • BOSTON, MA 02108

  2. WHAT ARE GLOBAL PAYMENTS? • Under global risk arrangements, health care providers are put on a budget for the care of their patients. At the end of the year, if the provider is under its budget, it earns a surplus; if the provider is over its budget, it pays a deficit to the insurer. • Global payments are expected to lower health care costs.

  3. OUR REVIEW AND ANALYSIS • TOTAL MEDICAL EXPENSES (TME): The total cost of all the care that a patient receives, including the payments by the health plan for the care of the patient, and any copayment or deductible for which the patient is responsible. TME reflects both price of services and volume of services.

  4. THE PROMISE OF GLOBAL PAYMENTS • Are providers on global risk contracts more efficient? • Are providers who are paid on global risk contracts rewarded for being more efficient? • Are providers ready to shift to global risk?

  5. THERE IS NO RELATIONSHIP BETWEEN TME AND PAYMENT METHODOLOGY

  6. THERE IS NO RELATIONSHIP BETWEEN TME AND PAYMENT METHODOLOGY

  7. THERE IS NO RELATIONSHIP BETWEEN TME AND PAYMENT METHODOLOGY

  8. GLOBAL BUDGET DO NOT NECESSARY CREATE INCENTIVES FOR PHYSICIANS TO PERFORM MORE EFFICIENTLY • Negotiated differences in global budgets, rather than the relative efficiency of providers, is a better predictor of whether or not a provider will receive a surplus or pay a deficit.

  9. 2009 AQC PARTICIPANTS ARE UNLIKELY TO HAVE LOWER TME THAN NON-AQC PARTICIPANTS BY 2013

  10. PROVIDER RISK REQUIRES INVESTMENT AND MAY PRESENT CHALLENGES THAT PROVIDERS ARE NOT EQUIPPED TO BEAR • Bearing financial risk requires significant investment. • Providers have limited experience managing risk and global payments. • Risk contracts expose providers to random insurance risk that they are not equipped to bear.

  11. Jenn Smagula, FSA, MAAA

  12. RECOMMENDATIONS Promote tiered and limited network products to increase value-based purchasing decisions. Develop appropriate regulation, solvency standards, and oversight for providers who contract to manage the risk of insured and self-insured populations.

  13. REPORT ON EXAMINATION OF HEALTH CARE COST TRENDS AND COST DRIVERS PURSUANT TO G.L. c. 118G, § 6½(b) OFFICE OF ATTORNEY GENERAL MARTHA COAKLEY ONE ASHBURTON PLACE • BOSTON, MA 02108 June 29, 2010

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